Housing Supply Ends 2024 with a Significant Rise, Up 12% Year Over Year
The U.S. housing market wrapped up 2024 on a high note, recording a 12% increase in active listings compared to the previous year. This growth was fueled by homes lingering longer on the market, causing an accumulation of supply. As mortgage rates and home prices fluctuated, both buyers and sellers found themselves adapting to shifting market dynamics. Below, we analyze the key factors contributing to this trend, along with detailed metrics and insights into what 2025 might hold.
Key Market Trends Driving the Increase in Housing Supply
- Higher Mortgage Rates: The average 30-year fixed mortgage rate reached 7.16% by December 26, up from 6.67% the year prior. Higher rates dampened buyer demand, slowing the pace of home sales.
- Lingering Listings: Homes stayed on the market longer, with the median days on market increasing by six days year over year to 45 days. This stagnation contributed to a buildup of inventory.
- Stabilizing New Listings: New listings remained flat compared to the previous year, suggesting sellers were hesitant to enter a market marked by rising mortgage rates and cooling demand.
Homebuyer Demand Indicators
Several indicators illustrate a mixed picture of buyer interest:
- Google Searches for “Home for Sale”: Search activity rose 1.5% from a month earlier but was still down 26.1% year over year, reflecting cautious optimism among potential buyers.
- Redfin Homebuyer Demand Index: This measure of home tours and buying services showed a 4% year-over-year increase, signaling steady, albeit subdued, interest in the housing market.
- Touring Activity: Despite a seasonal decline, the drop in touring activity from the start of the year (-52.9%) was less severe than in 2023 (-57.7%).
Pricing Trends and Affordability Challenges
Housing prices continued their upward trajectory, although at a more modest pace:
- Median Sale Price: Reached $383,725, up 6% year over year.
- Median Monthly Mortgage Payment: Increased 7.1% to $2,519, reflecting the impact of higher interest rates.
- Sale-to-List Price Ratio: Dropped slightly to 98.4%, indicating that sellers had to make minor concessions to close deals.
While prices rose, fewer homes sold above their asking price (23.3% compared to 25.1% a year earlier), signaling a shift towards more balanced market conditions.
Regional Highlights and Disparities
The housing market’s performance varied significantly across metropolitan areas:
- Biggest Price Gains: Philadelphia (+17.1%), Milwaukee (+14.3%), and Cleveland (+13.3%) led in year-over-year median price increases.
- Pending Sales Growth: Cities like Detroit (+7.8%) and Anaheim (+6.5%) showed robust growth, while San Antonio and Orlando experienced double-digit declines.
- New Listings Activity: Oakland (+9%) and Las Vegas (+8.9%) saw notable increases, whereas San Antonio and Nassau County recorded significant drops (-18.3% and -13.9%, respectively).
Balancing Supply and Demand
The months of supply metric, a key indicator of market balance, reached four months by year-end, up 0.6 points year over year. This level is nearing the range considered balanced (4-5 months), suggesting that neither buyers nor sellers held a clear advantage in many markets.
Insights
Why Is Housing Supply Growing?
- Higher Interest Rates: Elevated borrowing costs discouraged buyers, extending the time homes remained on the market.
- Post-Pandemic Adjustments: As the market cools from its pandemic-era frenzy, more balanced conditions are emerging.
What Does This Mean for Buyers and Sellers?
- For Buyers: Increased supply means more options and potentially less competition. However, affordability remains a challenge due to high mortgage rates.
- For Sellers: Pricing competitively and being open to concessions are crucial to attracting buyers in a more balanced market.
Will Prices Continue to Rise?
While prices are expected to increase moderately in 2025, the pace will likely slow as affordability constraints weigh on demand.
Looking Ahead to 2025
The housing market in 2025 will depend heavily on macroeconomic factors such as interest rate policies, inflation, and employment trends. With inventory levels rising and demand indicators showing mixed signals, experts predict a continued transition toward a more balanced market.
Potential Scenarios:
- If mortgage rates stabilize or decline, buyer demand could rebound, absorbing some of the excess supply.
- Conversely, persistently high rates might further temper demand, keeping supply levels elevated.
Conclusion
The 12% year-over-year increase in housing supply by the end of 2024 highlights a market in flux. While rising mortgage rates and extended listing times contributed to this growth, regional disparities and affordability challenges remain pivotal factors. As we enter 2025, buyers and sellers should prepare for a market defined by moderation and balance. Staying informed about evolving trends and market conditions will be key to navigating the year ahead.
